State will audit Olympic authority (update)

Intent said to support ORDA as it handles challenges

March 28, 2013

LAKE PLACID - The state Comptroller's Office will audit the state Olympic Regional Development Authority, which is reportedly dealing with persistent financial issues even as its venues rebound strongly from a lackluster 2011-12 winter season.

Comptroller Thomas DiNapoli said in a press release Wednesday that he will launch a full financial audit of ORDA after a report by his office discovered operational losses and a reliance on private lenders to meet expenses.

First Deputy Comptroller Pete Grannis - a former commissioner of the state Department of Environmental Conservation - told the Enterprise the audit is not a condemnation of ORDA's current financial practices. Its aim, he said, is to help ORDA become more efficient as it takes on new ventures, like operation of the Belleayre Mountain Ski Center.

Article Photos

A snowboarder takes to the slopes of Whiteface Mountain earlier this month.(Photo for the Enterprise — Richard Rosentreter)

"This is a small authority that is taking on more responsibility, and I think there were just concerns about whether or not there might be more efficiencies and a better way to do things that might benefit the ORDA bottom line and their general day-to-day operations," he said. "There was no flash point; there was no key issue that gave rise to our decision to go ahead with an audit."

ORDA President and CEO Ted Blazer said in a statement that the state's preliminary financial report was unexpected and contained inaccuracies.

"ORDA was not made aware of the Comptroller's report prior to its release and had no communication with the office prior to (Wednesday)," he said. "If given that opportunity, ORDA would have given an appropriate and justifiable response as it relates to its financial practices and procurements."

Grannis said the audit is expected to begin within the next couple of weeks and could take four to six months to complete. Once done, the audit will be reviewed by ORDA, and then both parties will discuss its finding and recommendations before it's made public.

"The value to ORDA is to have us get something to them soon enough so, if we have positive recommendations, they can start to implement them for their next fiscal year," Grannis said.

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Financial challenges

ORDA operates ski centers at Whiteface Mountain in Wilmington, Gore Mountain in North Creek and now Belleayre Mountain in the Catskills, and runs Olympic sports venues in and around Lake Placid. Most of the authority's revenue comes from activities at those venues, although it also receives money from the state, the town of North Elba, the Empire State Development Corporation and the New York Power Authority.

Operation of Belleayre was transferred to ORDA from the DEC last year after Gov. Andrew Cuomo's Spending and Government Efficiency Commission suggested that the authority was better suited to run the ski center. In a report released this month, called "Public Authorities by the Numbers: Olympic Regional Development Authority," the comptroller's office says the transfer came at a time "when the Authority continues to grapple with financial challenges."

ORDA's subsidy from the state has been reduced by nearly 50 percent in the last five years. In 2008, ORDA received $8 million from the state; last year, it got $4.7 million. North Elba's 2012 appropriation to ORDA was about $902,000, some of which is offset by a state grant through Sen. Betty Little's office.

In 2012, ORDA spent $40.4 million and took in $39.7 million. The authority suffered an operating loss of $16.9 million, according to the comptroller's office, including a $3.1 million loss caused by last year's historically warm winter.

Blazer said the audit should have disregarded "non-cash" items to better illustrate ORDA's "true cash position." Those items include back depreciation totaling $6.725 million, state and town appropriations of $7.8 million and post-retirement benefits.

The report claims that ORDA's staff has grown by 38 percent since 2008. Blazer said ORDA "does not know where the Comptroller's office is getting this information and does not agree." A 20 percent increase in compensation cited in the report is "directly related to increases in health care cost, retirement and workers' compensation," Blazer said.

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Debt

ORDA doesn't have any outstanding long-term bonds, but it does rely on a close to $7 million line of credit to help pay for capital projects and other operating expenses. Some of those funds are used with the expectation that the authority will receive Empire State Development grants. As of last year, that credit account had $3.5 million available and $3.1 million owed.

"Obviously, the reliance on a private line of credit is necessary," Grannis said. "They've got costs and they've got payroll to meet and other things, and if the state doesn't come through in a timely way, I think that's been sort of a lifeline."

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Procurement

The comptroller's preliminary report notes that ORDA had 304 "active procurement contracts" as of last year totaling $27 million. Only 107 of those contracts were procured through a competitive bidding process.

As an authority, ORDA is not required to put contracts out to bid the way a state agency or municipality would. Grannis said competitive bidding might result in cheaper contracts.

"Those are the kind of things we hope to be able to identify when the auditors look at how they run their business," he said.

Blazer said that the "bulk of the procured items" identified in the report - things like power transmissions and parts for ski lifts - didn't require bids.

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Union issues

As ORDA looks to address these financial challenges, approximately 150 union workers represented by the Civil Service Employees Association Local 059 are still waiting for a new contract. The last one expired on March 31, 2009. ORDA spokesman Jon Lundin confirmed Wednesday that a new deal hasn't been reached, but he declined to comment further, citing ongoing negotiations.

A call to Kathy Garrison, CSEA's regional president, hadn't been returned as of this morning.

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Strong winter

ORDA's recipe for success is simple: When conditions are good, business is good. That scenario has played out over the last two years. The 2011-12 winter season was disappointing for ORDA, mostly because of unseasonably warm temperatures and little snow.

Blazer delivered a glowing report on the 2012-13 winter season at Tuesday's Board of Directors meeting. Even though figures - like revenue and visitor totals - are only available through Jan. 31, 2013, Blazer said it's safe to say that this year has been a success.

"When we were at the beginning of our season, everything was in place," he said. "Our venues were ready, we had some anticipation of some snow, our crews had been out on the road doing marketing shows, we had a new website put in place, we had new management, we just had assumed (control) of Belleayre Mountain. We were ready to go. But we were thinking, 'How's it all going to work? How's it all going to fall into place?'

"We had an uncertain year the year before, but we were really looking forward to this year. As we got off the ground, we had some snow, and we nailed it."

The weather this year allowed Whiteface to open before Thanksgiving for the first time in years. Aside from a warm spell in January, temperatures have been much colder this year, and snow cover has been more consistent. All three ski areas remain open for spring skiing.

"Things did work out," Blazer said.

Allan Walther of the Bonadio Group, ORDA's independent auditor, said Tuesday that revenues through Jan. 31 are up $4.5 million when compared to 2012. Of that increase, some $3 million comes from new revenue at Belleayre, while the remaining $1.5 million is attributed to increased sales at the three ski centers.

So far, Gore's 2012-13 revenue has increased by about $692,000, while Whiteface's is up by approximately $450,000. Gore had touted many improvements this winter, including four new connector trails, a renovated pub and restaurant, new snow guns and new grooming tractors.

ORDA's marketing team continued its public outreach campaign before and during this ski season, Blazer said. One of the big events was Winter Jam, held in Manhattan's Central Park the last weekend of January. Crews from Gore blasted snowmaking guns in the park, and ORDA set up booths promoting its three ski areas. The event also gave city dwellers an opportunity to try out snowboarding, downhill and cross-country ski gear.

Between 25,000 and 30,000 people attended Winter Jam, Blazer said.

"It's a great way for us to reach that market that is so important to us," he said.

ORDA hopes to extend its winter season well into April. The tentative closing date at Whiteface and Gore is April 14. Lundin said the authority hasn't set a firm closing date at Belleayre.

"Conditions are more January-like at this point," he said. "If conditions allow, we'll consider extending it a little bit."